Making Tax Digital: the use of spreadsheets confirmed by HMRC

On 15 November 2017, ICAEW Tax Faculty met with HMRC to discuss Making Tax Digital (MTD) for VAT. Following discussions with businesses and agents we have expressed the paramount importance of spreadsheets in calculating figures to be reported on VAT returns and VAT liabilities in our response to the published VAT legislation overview consultation (see ICAEW rep 128/17).

On 18 December 2017, HMRC published draft VAT secondary legislation together with details of various software journeys businesses might take in order to comply with MTD for VAT. There are seven journeys in the document and it is example two which confirms that it will be acceptable to continue to use spreadsheets to calculate the VAT liability. The spreadsheet must be able to prepare the VAT return figures which can then be automatically transferred into HMRC’s system via an API (application programme interface) or bridging software. This is welcome news for those preparing the VAT figures as current processes may largely continue but rather than re-key the figures into the nine boxes on HMRC’s online portal, the totals will have to transfer at the touch of a button. It also means there is no requirement (at present) for data to flow ‘hands free’ directly from accounting systems through to HMRC.

But note that the long term plan is for the numbers to flow directly from accounting software and software houses are gearing up for this.

We will be discussing these VAT journeys and the VAT requirements themselves during our free demystifying MTD webinar on Tuesday 16 January at 11:00. Why not join us? You will find all the details and booking instructions on our events page.

I deal with a gymnastics coaching facility using Excel spreadsheets very satisfactorily but they are very unique ( ie horrendous !) due to the partial exemption rules that have to be applied. How on earth are these figures going to be able to be transferred ? I cannot see HMRC thinking of these specifics when designing their transfer software. The business will not want to pay out for any more software over and above it's current membership/ course register/ fees software . Why cannot the HMRC trust as, as James says, to just enter the relevant figures as calculated on the form as we do now?

The main reason why HMRC will not provide software - is that it is not their job - they are tasked with raising and collecting taxes - and not being a software house themselves. Some commercial software houses complained, I make no comment as to who - and that is why they are moving away from providing free software themselves - so don't blame them!

Having been a long-term user of spread sheets (since at least 1983), HMRC clearly do understand that very few people actually realise that spread sheets can be messed up (sometimes merely by inserting (or deleting) a row or column) by the uninitiated user. HMRC would be better advised to continue with the present online data entry system (at least for small businesses) but insist on any business that is larger to use approved software.